Former Hong Kong resident and flamboyant founder of the now-defunct file-sharing site Megaupload, Kim Dotcom, says he plans to sue the Hong Kong government for the role it played in his company's demise.

Dotcom, who legally changed his name from Kim Schmitz in 2005, is currently in a legal battle with the United States, which wants to extradite him from New Zealand to face charges of mass copyright infringement, racketeering and money laundering.

He, along with six other co-defendants, has been accused of making US$175 million in criminal proceeds through the site and costing copyright owners more than US$500 million by offering pirated copies of movies, television shows and other content.

In January 2011, his home and the Megaupload office in Hong Kong were raided by 100 customs officers working with the FBI and his assets were frozen.

Dotcom claims Megaupload was protected by the Digital Millennium Copyright Act that provides a safe harbour for sites so they cannot be held responsible for copyright-infringing material as long as the site acts quickly to block or take the content down.

The raids, along with one in New Zealand where Dotcom and three business partners were arrested, meant plans to float the firm in Hong Kong were dumped.

"We will take the Hong Kong government to court for the destruction of our business because they acted for the US government when shutting down our business and freezing all our bank accounts," said the 39-year-old, who lived in the city for eight years from 2003. "We were in the process of preparing a listing on the Hong Kong stock exchange and the valuation of our company was over US$2 billion. Fortunately, the US government will have to indemnify Hong Kong for any damages awarded to us."

The Hong Kong raid was carried out by officers from the Intellectual Property Investigation Bureau, the Financial Investigation Group, and the Anti-Internet Piracy and Computer Analysis and Response teams and in conjunction with a dramatic raid in New Zealand where Dotcom was living at the time.

Customs officials were first approached in late-2010 by the FBI to help them with the case against Megaupload.

Dotcom said his legal team was releasing a white paper about the case later this month.

A spokeswoman for the Customs Department would not comment on the case and would not reveal what had happened to the seized goods and money or if it was still helping the FBI.

In September, New Zealand Prime Minister John Key apologised to Dotcom after it was revealed government spies illegally monitored him as residents are protected from such action.

This article appeared in the South China Morning Post print edition as: